Open Market Operation
Refer to sale to sale and purchase of securities in the money market by the central bank. When prices are rising and there is need to control them, the central bank sells securities. The reserves of commercial banks are reduced and they are not in a position to lend more to the business community. Further investment is discouraged and the rise in prices is checked. On the contrary, in period of recession, the central bank buys securities.
No comments:
Post a Comment